Gustavo Gonzaga

Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil

Skilled labor earnings differentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tariffs, prices, earnings, employment and skill intensity. We find that: i) employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tariff changes across sectors were not related to skill intensities, but the pass-through from tariffs to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade was even larger than the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil. They also highlight the importance of considering the effects of differentiated pass-through from tariffs to prices.

Labor Turnover and Labor Legislation in Brazil

One of the main characteristics of the Brazilian labor market is its impressively high job and worker turnover rates. Although labor legislation in Brazil is very restrictive, dismissal costs are not high when compared with other Latin American countries. Moreover, many authors argue that the design of some job security programs creates perverse incentives that generate labor turnover. The objective of this paper is twofold. First, we describe Brazilian labor legislation, with emphasis on job security provisions and their incentives on workers reallocation. Then, after reviewing the most recent evidence on labor turnover in Brazil, we investigate the effects of changes in job termination costs implemented in the 1988 Constitution and in a Labor Law of September 2001 on employment duration. Both legislation changes increased firing costs and should have, therefore, reduced turnover for formal workers affected by them. A simple differences-in-differences methodology is applied to monthly individual data from Pesquisa Mensal de Emprego (PME, IBGE), which has information on previous employment spells for those currently unemployed. The results establish that both changes reduced turnover for formal workers affected by the legislation. A significant increase in average employment duration of affected workers relative to not affected workers was observed after both legislation changes. We also provided evidence that the 1988 Constitutional change reduced the probability of fake layoffs, although there are still a high number of such agreements being made between workers and their employers.

Equilibrium real exchange rate, volatility, and stabilization

Abstract This paper is composed of two parts. The theoretical part studies the effect of real exchange rate (RER) volatility on trade using a general equilibrium framework. The volatility of the RER is derived endogenously, and is caused by a demand shock, which may be influenced by inflation volatility. The model shows that RER volatility affects positively the equilibrium RER. In the empirical part, the behavior of several RER volatility indexes over the last fifteen years for Brazil is examined, identifying the influence of stabilization plans and inflation volatility. In fact, inflation volatility explains most of the variation in RER volatility in Brazil. In addition, export supply equations that include RER volatility as one of the explanatory variables are estimated for Brazil. For most specifications the RER volatility coefficient is negative, although not significantly different from zero. The implied elasticity for the most significant RER volatility coefficient is −0.05.

Labor Market Regulations and the Demand for Labor in Brazil

The main objective of this study is to evaluate the impact of the 1988 changes in labor market regulations on the level of employment and on the time required by firms to adjust their employment level to economic fluctuations. From the many aspects of labor market regulations, this study will concentrate on those that directly influence variable labor and dismissal costs. Evaluating the impact of changes in these costs on the level of employment and speed of adjustment will be based on estimates of structural dynamic models for labor demand at different points in time before and after the 1988 constitutional change. The empirical strategy will be to estimate such models from microlongitudinal monthly data for a sample of 5,000 on manufacturing establishments, which cover the period from January 1985 to December 1997. To try to isolate the effect of the constitutional change on the parameters of the demand function from the effect of the process of trade liberalization and of the series of stabilization plans that also occurred in the end of the 80’s, we regress our monthly estimates of these parameters on a temporal indicator for the 1988 constitutional change, controlling for a variety of other macroeconomic indicators. O objetivo principal deste artigo e avaliar o impacto das mudancas na regulacao do mercado de trabalho, implementadas com a Constituicao de 1988, sobre o nivel de emprego e a velocidade do ajuste do emprego a flutuacoes economicas. Entre os varios aspectos da regulacao do mercado de trabalho, nossa analise prioriza aqueles relacionados aos custos variaveis do trabalho e custos de demissao. A avaliacao dos impactos da variacao destes custos sobre as variaveis mencionadas sera baseada em estimativas de um modelo dinâmico de carater estrutural da demanda por trabalho em varios periodos, anteriores e posteriores a mudanca constitucional de 1988. A estrategia empirica consiste em estimar o modelo por intermedio de dados microlongitudinais de periodicidade mensal. Os dados sao da Pesquisa Industrial Mensal, que reportam informacoes sobre cerca de 5 mil estabelecimentos industriais. Nossa analise compreendera o periodo de janeiro de 1985 a dezembro de 1997. Os resultados nao mostram nenhuma evidencia de que os parâmetros da demanda por trabalho tenham tido seus valores alterados por volta de 1988. Estes resultados continuam validos mesmo quando se considera a influencia de fatores macroeconomicos sobre a evolucao mensal dos parâmetros estimados.

Os efeitos da redução da jornada de trabalho de 48 para 44 horas semanais em 1988

The reduction of standard weekly working time from the current level of 44 hours to 40 hours has recently been proposed by the main central unions as a way to create jobs and reduce unemployment in Brazil. The idea, known as work-sharing, is that the reduction in average hours per worker would allow the same tasks to be performed by more employees, a notion which has been challenged in the theoretical and empirical literature. The objective of this paper is to study the effects of the workweek reduction from 48 to 44 hours prescribed by the 1988 Constitution on the Brazilian labor market. We find that the Constitutional changes reduced actual working hours, did not change the probability of the affected worker of becoming unemployed in 1989 (relative to other years), reduced the probability of the affected worker of not having a job in 1989 (which includes those that left the labor force) and implied a relative increase in real hourly wages (although lower than observed for workers that reduced the workweek time in other years). These results suggest that the working time reduction did not have a negative impact on employment in the short run (12 months after the constitutional change).

Emprego Industrial no Brasil: Análise de Curto e Longo Prazos

In this paper we estimate the parameters of the traditional dynamic labor demand model. We base our empirical analysis on information provided by a monthly survey for the Brazilian manufacturing sector (PIM/IBGE) for the period 1985-1999. Since non-stationarity evidence was found, we also estimate cointegration relations and the corresponding vector error correction models (VECM). This estimation incorporates the restrictions imposed by Euler equations of quadratic linear models as shown in Dolado et al. (1991). Estimated values for product elasticity, in the short run, vary from 0,025 to 0,037 according to the specification. Estimated values for wage elasticity, in the short run, vary from 0 to -0,026. In the long run, the estimation range for both parameters is much wider, depending on the specification used.

Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil

It is widely believed that the presence of a large informal sector increases the ef?ciency costs of social programs in developing countries. We develop a simple theoretical model of optimal unemployment insurance (UI) that speci?es the ef?ciency–insurance tradeoff in the presence of informal job opportunities. We then combine the model with evidence drawn from 15 years of uniquely comprehensive administrative data to quantify the social costs of the UI program in Brazil. We ?rst show that exogenous extensions of UI bene?ts led to falls in formal–sector reemployment rates due to offsetting rises in informal employment. However, because reemployment rates in the formal sector are low, most of the extra bene?ts were actually received by claimants who did not change their employment behavior. Consequently, only a fraction of the cost of UI extensions was due to perverse incentive effects and the ef?ciency costs were thus relatively small — only 20% as large as in the US, for example. Using variation in the relative size of the formal sector across different regions and over time in Brazil, we then show that the ef?ciency costs of UI extensions are actually larger in regions with a larger formal sector. Finally, we show that UI exhaustees have relatively low levels of disposable income, suggesting that the insurance value of longer bene?ts in Brazil may be sizeable. In sum, the results overturn the conventional wisdom, and indicate that ef?ciency considerations may in fact become more relevant as the formal sector expands

Oferta de trabalho e ciclo econômico: os efeitos trabalhador adicional e desalento no Brasil

The discouragement effect was introduced by Long (1953). According to this effect, unemployed workers choose to leave the workforce during recessions, when expected wages and the likelihood of getting a job are lower. The added worker effect acts in the opposite direction. Reductions in household income during recessions could induce other members of the family to enter the labor market in order to maintain the level of consumption unchanged. The added worker effect has been estimated through the temporary entry of married women – whose husbands become unemployed – into the workforce. In this paper, we investigate empirically how the added worker and discouragement effects influence the labor participation rate in Brazil, using data from the PME. The added worker effect is represented by the difference in the probability of participation between wives whose husbands lost their jobs and wives whose husbands remained employed. The discouragement effect is estimated by the impact of changes in macroeconomic cycles, which are represented by deviations of the average labor earnings in each period from a given reference value, on participation. The results show that both effects play a role in determining the labor participation rate in Brazil.

A partilha do trabalho e a demanda dinâmica por trabalhadores e horas

This paper investigates whether a reduction in standard hours has a positive impact on the employment level, an effect known in the literature as work-sharing. The innovation here is to include employment adjustment costs in the theoretical model. This feature introduces interesting dynamic aspects, which make it possible to study optimal paths of employment and average hours both in the short and the long run. The main result is that work-sharing does not occur even in the presence of employment adjustment costs.